Quantitative Finance
Currency arbitrage capitalizes on price discrepancies in currency exchange rates between markets to produce profits with minimal risk. By employing a combinatorial optimization problem, one can ascertain optimal paths within directed…
The marketing departments of financial institutions strive to craft products and services that cater to the diverse needs of businesses of all sizes. However, it is evident upon analysis that larger corporations often receive a more…
The rapid expansion of e-commerce and the widespread use of credit cards in online purchases and financial transactions have significantly heightened the importance of promptly and accurately detecting credit card fraud (CCF). Not only do…
We consider the path-dependent volatility (PDV) model of Guyon and Lekeufack (2023), where the instantaneous volatility is a linear combination of a weighted sum of past returns and the square root of a weighted sum of past squared returns.…
Reinforcement learning (RL) is a subfield of machine learning that has been used in many fields, such as robotics, gaming, and autonomous systems. There has been growing interest in using RL for quantitative trading, where the goal is to…
We propose a structural default model for portfolio-wide valuation adjustments (xVAs) and represent it as a system of coupled backward stochastic differential equations. The framework is divided into four layers, each capturing a key…
Artificial intelligence is transforming financial investment decision-making frameworks, with deep reinforcement learning demonstrating substantial potential in robo-advisory applications. This paper addresses the limitations of traditional…
In economic analysis, rational decision-makers often take actions to reduce their risk exposure. These actions include purchasing market insurance and implementing prevention measures to modify the shape of the loss distribution. Under the…
We investigate whether large language models (LLMs) can successfully perform financial statement analysis in a way similar to a professional human analyst. We provide standardized and anonymous financial statements to GPT4 and instruct the…
In this paper, we introduce a new class of set-valued risk measures, named set-valued star-shaped risk measures. Motivated by the results of scalar monetary and star-shaped risk measures, this paper investigates the representation theorems…
The paper presents a comprehensive causality analysis of the US stock and commodity markets during the COVID-19 crash. The dynamics of different sectors are also compared. We use Topological Data Analysis (TDA) on multidimensional…
In a rapidly evolving landscape marked by continuous change and complex challenges, effective cash management stands as a cornerstone for ensuring business sustainability and driving performance. To address these pressing demands, cash…
Financial risks can propagate across both tightly coupled temporal and spatial dimensions, posing significant threats to financial stability. Moreover, risks embedded in unlabeled data are often difficult to detect. To address these…
This paper studies the time-varying structure of the equity market with respect to market capitalization. First, we analyze the distribution of the 100 largest companies' market capitalizations over time, in terms of inequality,…
The paper investigates the performance of the European option price when the log asset price follows a rich class of Generalized Tempered Stable (GTS) distribution. The GTS distribution is an alternative to Normal distribution and…
This paper presents a novel framework for decentralized annuities, aiming to address the limitations of traditional pension systems such as defined contribution (DC) and defined benefit (DB) plans, while providing lifetime financial…
This paper provides a dual formulation of the optimal consumption problem with internal multiplicative habit formation. In this problem, the agent derives utility from the ratio of consumption to the internal habit component. Due to this…
Style investing creates asset classes (or the so-called "styles") with low correlations, aligning well with the principle of "Holy Grail of investing" in terms of portfolio selection. The returns of styles naturally form a tensor-valued…
This paper explores key theoretical frameworks instrumental in understanding the relationship between sustainability and institutional investment decisions. The study identifies and analyzes various theories, including Behavioral Finance…
We consider the pricing and hedging of counterparty credit risk and funding when there is no possibility to hedge the jump to default of either the bank or the counterparty. This represents the situation which is most often encountered in…